UK - Members of Liverpool City Council have voted unanimously to pressure Merseyside Pension Fund to ballot participants on an ethical investment policy.

The motion, tabled last night by Liberal Democrat councillor Richard Oglethorpe, stated: "The council believes that a democratic organisation should reflect the ethos of its members".
 
And as a result it requested Merseyside Pension Fund Management Committee "ballot its beneficiaries to determine whether or not they would wish to see the fund's Statement of Investment Principles amended to include an ethical dimension".

The motion was approved by all members of the council. The city will now inform the other four Merseyside member authorities of its position, and will ask them to write "in a similar vein" to the Merseyside pension fund management committee.

However, a spokesperslon for Liverpool City Council conceded it  has no right to force the matter as it lacks overall control over the fund,

As a result, the council can only lobby other participating authorities, including the four other Metropolitan Boroughs of Knowsley, St Helens, Sefton and Wirral, and threaten the fund with negative publicity.

However, in a statement, Wirral Metropolitan Borough Council, which oversees the pension fund, said the Merseyside Pension Fund "acknowledges the resolution passed by Liverpool City Council but does not agree that a ballot is necessary".

It claimed the fund "already considers ethical factors when making decisions and is a signatory to the United Nations' Principles for Responsible Investment (UNPRI)".

It argued that this signifies a "commitment to incorporate ethical, social, and environmental factors into the fund's investment strategy", which has been agreed by representatives from all five authorities - including Liverpool - and claimed "the views of different stakeholders, including taxpayers, employers and fund members are all represented within this structure".

The statement also highlighted that as more than 100,000 people rely on Merseyside Pension Fund to provide for their retirement, the scheme "has a legal obligation to achieve the most from its investments".

"Excluding certain stocks or activities from investment portfolios would create additional risk, which may not be rewarded by a higher return. It would also involve considerable expense and disrupt the performance of the fund's portfolios. A lower financial return would mean that local council taxpayers would be burdened with making up any shortfall," the statement said.

Liverpool and Knowsley councils tabled a similar motion at the end of last year calling for divestment of pension assets from investments linked to the arm trade. However, the motion was rejected following legal advice that suggested this action would be against the fiduciary responsibility of trustees and fund officials. [See earlier IPE.com article: Legal threat to pensions arms trade decision]

Alec McFadden, president of Merseyside TUC, said there have been a number of meetings with unions since the rejection of the earlier proposals. He added that pension funds across the country have expressed their support for the proposals, which suggests if the new motion is successful it could create a "snowball" effect across other local government pension funds. 

"Since the last motion the prime minister has made a statement on cluster bombs which shows we're moving in the right direction, but slowly," McFadden said.

He pointed out that this compares unfavourably to other parts of Europe, particularly Norway and the Netherlands, where more focus is placed on environmental and social governance (ESG) factors and socially responsible investing (SRI) for pension funds.

As a result, McFadden revealed: "If we don't win this at the next board meeting, then we are going to call an international conference and bring some of these people who have been successful on this issue across from Europe to explain how they did it, as European legislation must be identical."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

 

Topics